CHICKEN and egg producers have plenty of reasons for optimism, with solid demand signals and improving production costs pointing toward a sunny finish to the year and solid footing ahead for 2014.
Cal-Maine Foods, the nation's largest producer of fresh shell eggs, reported that net sales for its first fiscal quarter were up 17% from the same period last year, at $319.5 million. While net income fell nearly 6.4% from last year, the net sales figure offered something to smile about.
"These figures reflect higher volumes and higher average selling prices compared with the first quarter last year," Cal-Maine president and chief executive officer Dolph Baker said. "Specialty eggs have continued to gain in popularity with consumers and accounted for 16.2% of dozens sold and 24.6% of total shell egg sales for the first quarter."
Baker said the average selling prices for specialty eggs, meanwhile, increased 5.5% year over year, indicating strengthening demand for cage-free, organic and "nutritionally enhanced" egg products.
While livestock and poultry producers are banking on better feed costs — now that corn prices have fallen to their lowest levels in three years — those lower prices take time to filter through to feeders.
"Our operations have run well this summer. However, our overall production costs were higher during the first quarter than a year ago," Baker said. "Market prices for grain have remained high, and our feed costs were up 3.4 cents/doz., or 6.7%."
Improving yield prospects, however, point to significantly lower feed costs for the rest of the fiscal year, he said.
For the 13 weeks ending Aug. 31, Cal-Maine sold 242.5 million doz., up 15.5% from the same quarter last year. The average selling price tallied $1.253/doz., an increase of 1.2%, and feed costs totaled 54.4 cents/doz.
According to new data from the American Egg Board (AEB), egg servings in the quick-service restaurant (QSR) sector are growing in response to the board's strategic focus on foodservice. Egg servings in QSRs through May were up 1% to 4.4 billion, an increase of 612 million since 2006.
Across the spectrum of foodservice, AEB said egg servings held steady, and while QSR servings were up, gains were offset by declining servings at mid-scale and casual-dining restaurants. The QSR segment accounts for 78% of all egg servings in the channel, according to AEB.
On the basis of grams of protein per dollar spent, AEB said eggs are at the top of the heap — at 40 g per dollar — compared with other animal-derived sources. That is slightly higher than milk at 36 g and well ahead of chicken breast at 27 g and beef round roast at 20 g.
Media reports during the latter weeks of September focused on the U.S. Department of Agriculture's reaffirmation of equivalence for Chinese poultry inspections, with a number of consumer advocates and legislators questioning the wisdom of permitting chicken from China to cross the Pacific and end up in U.S. stores.
While the move to appease China is largely seen as a play to open its market to U.S. chicken, pork and beef products, consumers here should have little fear that imported chicken will end up on their plate, according to a spokesman for the National Chicken Council (NCC).
A very small amount of chicken is imported into the U.S., according to the council, because domestic producers produce enough to meet the market demand. Tom Super with NCC said 99% of the chicken consumed in the U.S. is "hatched, raised and processed" domestically — something that is unlikely to change in the near future.
Under current USDA rules, Chinese companies approved to export to the U.S. would actually have to purchase frozen U.S. chicken, have it shipped to China, process the product, cook it and reship the frozen, processed product back to the U.S., which likely sounds somewhat unrealistic.
Critics of the USDA approval, however, argue that much cheaper labor costs in China could indeed lead U.S. companies or multinationals to conduct offshore further processing of birds at some point.
Regardless of the move, Alltech vice president Mark Lyons sees a bright future for the Chinese poultry industry. Speaking at the International Poultry Forum in Beijing, China, last month, Lyons said young, educated Chinese consumers are building a strong middle class who are willing to pay more money for higher-quality foods.
Lyons said meat prices in China will see a mild recovery as animal disease concerns subside, since there is plenty of frozen chicken in inventory.
China's economic growth is expected to push 8% this year, which should also support improved institutional and QSR sales in the coming months.